Volume   Journal
International
I Number 1 2010 for Environmental Rehabilitation and Conservation
[52-58]
Volume I No. 1 2010
[ISSN 0975 - 6272] [52-58] [ISSN 0975 - 6272]
Meetu Khanduja
Indian pharmaceutical industry and patent amendments
Meetu Khanduja
Received: January 20, 2010 ⏐ Accepted: February 24, 2010 ⏐ Online: April 4, 2010
Abstract
The history of Patents in India dates back to
1985 and since then has undergone various
amendments. However, seeking to develop a
domestic pharmaceutical industry, in 1970,
India abolished patents on pharmaceutical
products. The WTO agreement contains an
agreement on IP, namely, the Agreement on
Trade Related Aspects of Intellectual Property
(TRIPS). This Agreement made protection of
intellectual property an enforceable obligation
of the Member States. As of January 2000, all
developed and developing countries who are
members of the World Trade Organization
(WTO) were obligated to have domestic laws
and enforcement mechanisms that comply with
the international standard set under TRIPS.
Doing so included introducing full product
patents on pharmaceutical innovations,
extending all patents from 5-14 years to 20
years, and accepting limitations on compulsory
licensing. The Govt. of India agreed to TRIPS
for the additional benefits of WTO.
Keywords: Patents ⏐ Indian pharmaceuticals
⏐ Amendments ⏐ WTO ⏐ TRIPS
For Correspondence:
1
Faculty of management, Gurukula Kangri University,
Haridwar, India
Email: mitika21@gmail.com
Indian pharmaceutical industry and patent amendments
 
Introduction
After Independence, the Indian pharmaceutical
industry saw many ups and downs. Two expert
committees were established in independent
India to study patents and provide suggestions
on the type of patent system that India should
implement. These committees conducted an
extensive survey of patents in India. The Patent
Enquiry Committee (1948-1950) and the
Ayyangar Committee (1957-1959). The reports
of these comities concluded that foreigners held
80-90% of the patents in India and were
exploiting the system to achieve monopolistic
control of the market. The industry majorly
relied on drug import and the domestic’s drug
production remained minimal. The British
colonial patent system 1911 secured the Indian
market for the British industry. The
Multinational Corporations set their base in
India and they controlled 70-80 percent of the
market.
The Patent Act 1970 brought a great revolution
in the Indian Pharmaceutical industry. The Act
contained several provisions indented to
support the domestic pharmaceutical industry
by providing soft patent regime. Until then, the
cost of drugs in India was very high, the
availability of the drugs was low and the great
deal of the pharmaceutical needs was met by
imports. The R&D initiative was almost
negligible and so was the drugs export because
of lack of patent protection In India.
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Relationship between patents and
pharmaceutical industry growth:
A Patent is an exclusive right granted by the
Government of a country to an inventor over
his invention for a limited period of time.
Patent grants monopoly right to the inventor/
companies to make, use, manufacture and
market their invention. This means that a
company holding a patent on a drug in a
particular country can prevent other companies
to manufacture and sell the drug in that country
for the duration of the patent term. (20 years
according to WTO rule). Thus the companies
having the patent right can charge high prices
for the drugs as there are no competitors in the
market. Lack of competition leads to high drug
prices and limited industrial growth.
In the absence of patents, multiple producers
compete for a share of the market, driving the
price down as low as possible. In addition,
having multiple sources helps increase the
availability of drugs and hence growth in the
pharmaceutical sector. . In pharmaceuticals,
that has meant that a tiny tweak in the synthesis
of a molecule yields a new patent. Several
companies can produce the same drug, creating
competition that drives down prices.
The Patent Act, 1970
The patent Act 1970 which came into effect in
April, 1972 greatly weakened the IPR
protection particularly in the pharmaceutical
industry in India. The Act particularly
accomplished the following:
1. It disallowed product patent for “substance
intended to use or capable of being used as
food, or as medicine or drug”. Under the
Act , only the process patents were allowed
for these substances.
Indian pharmaceutical industry and patent amendments
2. The statutory term was shortened to 5 to 7
years on pharmaceutical process patents
and automatic licensing was put in place.
Effects
1. Inventions in the field of drugs,
pharmaceuticals and chemicals became
unpatentable, allowing inventions patented
elsewhere to be freely copied and marketed
in India.
2. It encouraged the domestic production of
drugs through adopting different
manufacturing process ( reverse engineered
products) thereby restricting the drug
imports.
3. India gradually became a major drug
exporter as the Act encouraged the local
firms to manufacture the copies of drugs by
adopting their own production methods.
4. India’s share in world exports of
pharmaceuticals has risen by 2.5 times over
the 1970 to 1998.
5. The share of pharmaceuticals in national
exports has increased from 0.55 per cent in
1970-71 to over 4 per cent by the 1999-
2000.
6. All inventors were affected by the weak
patent regime therefore, foreigners no
longer found taking out a patent in India
worthwhile. Thus, foreign ownership in
Indian drug industry decreases to 39% in
1993 as compared to 80% in 1970.
Growth of the pharmaceutical industry in
the absence of product patents
With the patent Act 1970, Indian
pharmaceutical Industry saw a significant
development. The amount of investment which
stood at Rs. 2250 million in 1973, rose to
Rs.6000 million by 1982. In the 1980s, the
industry had grown at a rapid rate of 11 percent
per annum, which further accelerated to 17
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percent per annum during 1990s (Pradhan
2004). The number of drug manufacturing units
grew from 2,257 (in 1970), to 16,000 (in 1990)
and to over 23,000 (in 2005).
<
Number of Drugs and Pharmaceutical Units
period of time. , the ratio of pharmaceutical
products to the total exports grew from a mere
0.6 percent in 1970-71 to 4.9 percent by 2000-
04. The ratio of pharmaceutical imports to total
imports, on the other hand, came down from
1.5% in 1970-71 to 0.8 percent in 2003-04.

Export and Import of Drugs and

Pharmaceuticals from 1993-94 to 2001-02
Years No. of Units

1952-53 1752
Years Exports(in Rs. Imports(in Rs.
Million) Million)
1969-70 2257
1993-94 14901 11374
1977-78 5201
1998-99 61520 30473
1979-80 5126
2000-01 72302 15020
1980-81 6417
2001-02 87299 20325
1982-83 6631
Source: Directorate General of Commercial
1983-84 9000 Intelligence and Statistics (DGCIS)
1984-85 9234
Amendments in the Patent Act 1970
1985-86 9540
The two recent amendment in the patent Act
1989-90 16000 1970, Patent (Amendment) Act 1999 and
Patent (Amendment) Act 2002, generally
2000-01 20053 aimed at ending the system of short-term
process patent and increased the patent term to
Source: DK Mittal (1993): Drugs and
20 years.
Pharmaceutical Industry, New Delhi, Annual
Publications Pvt. Ltd.
Patent Amendment Act 1999
Organisation of Pharmaceutical Producers of The Act was passed in March 1999 and has
India (2001), Drug Prices Control Order 95, retrospective effect from 1st January 1995. The
OPPI. Act was passed in order to comply with the
This industry, which produced only international standards of TRIPS agreement
formulations in the pre-1970s era, started which provided that patents shall be made
manufacturing more than 400 bulk drugs available for all the inventions whether process
making up around 6% of the international bulk or product.
drug market. The value of bulk drugs The major amendments were:
production has increased from Rs. 13,200 • EMR(Exclusive Marketing Rights) - EMR
million in 1993-94 to Rs. 2, 41,850 million in constitutes a monopoly right given to the
2002-03. patent applicant even before the grant of a
Another achievement of the industry is the patent. Exclusive Marketing Rights is only
production of low cost drugs. Also, the for selling and distributing the product but
composition of the Indian pharmaceutical not for manufacturing the same and is
industry import and export changed over this granted for five years from the date of the

Indian pharmaceutical industry and patent amendments

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EMR application or date or grant of patent
or rejection of patent whichever is earlier.
The application for the grant of an EMR
can be made for an invention relating to an
article or substance intended for use or
capable of being used as a drug or
medicine, developed after 1.1.2005.
• Section 5 (2) has been inserted by this
amendment which provides for filing of
applications for patent of a product in the
field of drugs, medicines and agro-
chemicals. It also includes alloys, optical
glass, semi-conductors and inter-mechanic
compounds.
Patent Amendment Act 2002
The salient features of the patent (Amendment)
Act 2002 are:
• Redefining the term invention
The patent Act 1970, provided that in order to
be patented, the invention must be useful but it
did not define the requirement of “capable of
industrial application”. The patent Amendment
Act 2002 redefines an invention as –
“invention" means a new product or process
involving an inventive step and capable of
industrial application”.
• The key issues included in this Amendment
were, re-defining patentable subject matter,
extension of the term of patent protection to
20 years and amending the compulsory
licensing system.
It is now possible to make an application for
patent claiming for a substance itself intended
for use or capable of being used as Medicine or
Drug, excepting the intermediate for the
preparation of drug.
Patent Amendment Act 2005
As a founder member of WTO, India has to
work within the confines of the provisions and
articles approved by the world body. One of
these is the Agreement on Trade-related
Aspects of Intellectual Property, or TRIPS,
which obliges WTO countries to grant patents
on technological products, including
Indian pharmaceutical industry and patent amendments
pharmaceuticals, subject to the normal tests of
novelty, inventiveness and industrial
applicability. (Article 27.1) India claims to
have conformed to the TRIPS agreement of
WTO by amending its patent Act for the third
time by an ordinance passed by the Central
Government on 27 December, 2004 that
eliminated 35 years of national exemption of
medicines from product patent protection. The
amendment introduced product patents for
drugs, foods and chemicals.
The Patent (Amendment) Act 2005 came into
effect from 1 January, 2005.A few important
amendments of the act are:
• Provision related to black box application
(means by which product patent
applications can be filed from January 1,
1995)- if filled before 1Jan. 2005 .Under
the transition provision of TRIPS, any
manufacturer who has made significant
investment for the manufacturer of product
and has produced and marketed the product
before 1 Jan. 2005 will able to continue the
production after 1jan. 2005 without
infringing the patent.
• Herbal preparations having medicinal value
can be patented under the amended law.
• TRIPs Art. 27(3)(b) makes it obligatory to
grant patents to microorganisms and
biological processes
• Routine issuance of compulsory licenses
after January 1, 2005 in India. Conditions
for obtaining compulsory license have been
clarified in order to facilitate export of
patented pharmaceutical products by Indian
companies to countries that do not have
adequate production capacities such as least
developed countries. The compulsory
licensing is an instrument that the TRIPS
allows by which governments can allow
domestic manufacturers to manufacture
patented products within 3 years of their
introduction.
• The Patents (Amendments) Act, 2005
introduced s. 92A which would not permit
export of compulsorily licensed medicines
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from India without a compulsory license
granted in the importing country.
• Remove provisions for the granting of new-
use or second-use patents, currently
described in Section 3(d) of the Patents Act.
The Amendments in the patent Act effected the
price (i.e., increased price) for two drug
categories: (i) the drug invented and patent
protected after 1 January, 2005, and (ii) the
generic drug until now protected by patent Act
1970 but patent protected outside India.
Post Amendment Scenario
While the patent Act 1970, focusing on the
process patent system helped to establish a
strong and highly competitive domestic
pharmaceutical industry and made India a bulk
supplier of drugs to the world, the recent
amendments in the Act will end the golden
period of the Indian pharmaceutical industry by
introducing the product patent system. The
product patent mechanism would filter the
pharmaceutical companies and would favor
only the ones with built-in scientific and
technical resources. R&D departments are
moving away from reverse-engineering in
favour of developing novel drug delivery
systems and discovery research.
In order to meet the growing changes, the
industry developed a new approach involving:
Contract Research
Companies specialized in the line of clinical
trials offered services which include product
development, formulation and manufacturing,
clinical trial management, toxicology and
clinical, medical and safety monitoring.
Contract Manufacturing
Many pharmaceutical multi nationals are
looking to outsource manufacturing to Indian
companies, which have a cost advantage in
comparison to companies in the developed
countries.
With regard to this, the pharmaceutical
companies are undertaking compliance with
reputed International regulatory agencies like
USFDA, MCC for their manufacturing units.
Current Scenario
The Indian pharmaceutical Industry is growing
very well for the past few years.

Table 2: FDI Inflows into India

(Rs. million) Year Pharmaceuticals All sectors Share of

pharmaceuticals
(%)
Aug 1991-Dec 1999 8221.75 576821.15 1.43
2000 2079.88 123537.34 1.68
2001 4081.79 167777.54 2.43
2002 2510.52 181955.56 1.38
2003 2793.28 116171.7 2.40
2004 15711.08 172665.2 9.10
2005 5107.25 192990.9 2.64
Total 40505.55 1531920 2.64
Source: Government of India, Department of Industrial Policy and Promotion, Ministry of
Commerce and Industry, Secretariat for Industrial Assistance, SIA Newsletter, various issues

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• High FDI (foreign direct investment):
global firms are reluctant to invest in a
country with no IPR protection.
Pharmaceutical industry accounts for about
2.91% of total FDI into the country. The
FDI in pharmaceutical sector is estimated to
have touched US$ 172 million, thereby
showing a compounded annual growth rate
of about 62.6%. Drugs and pharmaceuticals
sector is at 8th rank in India's top 10 FDI
attracting sectors.
• A recent market research done by RNCOS
– has found that the share of Indian
pharmaceutical industry is growing
commendably at a rate of 10% per year.
• The Pharmaceutical industry is growing at a
rate of 10.8 per cent and is expected to
reach $168 billion in the year 2009.
• India is the world’s fourth largest producer
of pharmaceuticals by volume, accounting
for around 8% of global production and
13th in terms of value of global pharma
business. In value terms, production
accounts for around 1.5% of the world total.
• The Indian pharmaceutical industry directly
employs around 500,000 people and is
highly fragmented. While there are around
270 large R&D based pharmaceutical
companies in India, including
multinationals, government-owned and
private companies.
• The estimated worth of the Indian
Pharmaceutical Industry is US$ 6 billion.
• Almost most 70% of the domestic demand
for bulk drugs is catered by the Indian
Pharma Industry.
• The Indian Pharmaceutical Industry is one
of the biggest producers of the active
pharmaceutical ingredients (API) in the
international arena.
• The Pharma Industry in India produces
around 20% to 24% of the global generic
drugs.
Indian pharmaceutical industry and patent amendments
Summary
So far, the Indian pharmaceutical industry has
made use of reverse engineering process and
cheap labor under the process patent regime to
produce bulk drugs and has become one of the
major exporter of drugs to the nation. The
advent of pharmaceutical product patent
recognition in January 2005 changed the
ground rules for Indian companies .The
industry is undergoing a transition phase. The
post-WTO scenario is likely to be characterized
by soaring drug prices, intense competition,
new drug discovery and introduction into
Indian markets, large expenditures on research
and development, large scale downsizing,
increase in social costs, etc. Indian companies
have adopted different strategies in order to
penetrate regulated generics markets. Some
have entered these markets through
partnerships with established generic
companies; others have set up their own sales
and marketing organisations, either organically
or through acquisitions. Today, Pharmaceutical
Market in India is actively partnering with
Government, NGOs and other Healthcare
providers to improve the health and quality of
life by innovating and developing safe, cost-
effective and quality medicines. It also aims to
increase the access of medicines to people in
rural areas and those living at or below the
poverty line.
References
Organisation of Pharmacuticals Procedures of
India (1994) Trade Related Intellectual
Property Rights (TRIPS) GATT
Anitha Ramanna, ‘Policy Implications of
India’s Patent Reforms
Newsletter, Ministry of law, justice and
company affairs, Kan & Krishme.
Sreedharan Sunita, Indain Law Institute, New
Delhi
The Hindu, online edition, Thursday, March
08, 2001
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CDRI Patents: Indian, Drugs and Magazine, Market research, April 1, 2007
Pharmaceuticals: Industry Highlights. edition
NISSAT. Vol.19 (3), 1996, 35-39. The Patents (Amendment) Rules 2005, ISBN
Patents (2nd Amendments) Rules, 2005, IDMA 011073341X.
Bulletin, XXXVI (27) 21st July 2005, Drahos, Peter (1996): A Philosophy of
52-54. Intellectual Property, Dartmouth
A handbook of copyright law, Government of Keayla, B.K. (2005): Patents (Amendment)
India, Ministry of HRD Ordinance 2004

   

   

   

   

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